Taking the measure of temporary employment

Transcription

1 Chapter 3 Taking the measure of temporary employment Temporary employment has grown in a number of OECD countries during the past two decades and this growth has raised concerns that temporary jobs may be crowding out more stable forms of employment, becoming an additional source of insecurity for workers and increasing labour market dualism between workers finding stable career jobs and those failing to do so. This chapter sheds light on these issues by assembling harmonised data on temporary employment in OECD countries. The share of temporary jobs in total employment is shown to have followed different trajectories in different OECD countries with the strong growth experienced in several European countries being a far from universal pattern. Temporary jobs are disproportionately filled by younger and less educated workers, but temporary workers are a diverse group who work in a wide range of occupations and sectors. Temporary jobs tend to pay less than permanent jobs and sometimes offer less access to paid vacations, sick leave, unemployment insurance and other fringe benefits, as well as less access to training. Temporary workers are also less satisfied with their jobs and more often report inflexible work schedules and monotonous work tasks. Despite the generally short duration of temporary jobs, temporary workers show considerable continuity in employment and between one-third and two-thirds of temporary workers move into a permanent job within two years, depending on the country considered. The other side of the coin is that up to one-fourth of temporary workers become unemployed, while even larger numbers remain in temporary jobs. Mobility into permanent jobs is lower for less educated workers and it cannot be excluded that a significant number of workers cycle among temporary jobs possibly with intervening spells of unemployment for an extended period of time. Policies to facilitate mobility from temporary into permanent jobs may be desirable for such workers. INTRODUCTION MAIN FINDINGS TRENDS AND MAIN FEATURES PAY, ACCESS TO FRINGE BENEFITS AND JOB SATISFACTION OF TEMPORARY WORKERS CAREER DYNAMICS OF TEMPORARY WORKERS CONCLUSIONS Annex 3.A. Defining and measuring temporary employment Annex 3.B. Job satisfaction and working conditions BIBLIOGRAPHY

2 128 Taking the measure of temporary employment List of Boxes 3.1. The special case of temporary agency workers Measuring working conditions Evidence from the literature on transitions from temporary to permanent jobs List of Tables 3.1. Components of temporary employment Contributions of temporary and permanent jobs to total employment growth, Incidence of temporary employment by individual and job characteristics, Distribution of temporary employment by individual and job characteristics, Wage determination principles applying to temporary employment Relative wages of temporary workers, Multivariate estimates of the wage penalty for temporary work, General conditions for entitlement to fringe benefits Relative job satisfaction of temporary workers, Working conditions of temporary and permanent workers, Job tenure of temporary and permanent workers, Multivariate estimates of the determinants of being offered a longer-duration temporary contract, Multivariate estimates of the determinants of receiving employer-provided training, Previous labour force status of temporary workers One-year and two-year mobility of temporary workers Multivariate estimates of the determinants of mobility for temporary workers, International comparisons of the determinants of mobility for temporary workers, A.1. Definitions of temporary employment used in Chapter A.2. Components of temporary employment analysed in Table A.3. Regulation of temporary work arrangements in OECD countries A.4. Examples of policies to stimulate the hiring of selected groups, with a potential impact on temporary employment B.1. Job satisfaction levels of temporary and permanent workers B.2. Incidence of temporary employment by number of jobs and unsocial hours, List of Charts 3.1. Share of temporary employment in OECD countries, Incidence of part-time work for temporary and permanent workers, Access to employer-sponsored training for temporary and permanent workers, Access to formal and informal training for temporary and permanent workers

3 Introduction Temporary employment has grown in a considerable number of OECD countries in the past two decades (see also OECD, 1993 and 1996, on the issue of temporary work) and this expansion has raised concerns that temporary jobs may be an additional source of insecurity and precariousness for workers. Concerns also have been expressed that temporary jobs may lead to growing labour market segmentation and dualism, trapping growing numbers of workers in a Hobbesian realm of short, brutish and mean jobs that offer little employment security, poor pay and fringe benefits, and little prospect of upward mobility (Rosenberg and Lapidus, 1999). However, reliable evidence for assessing these fears remains scarce, in part, due to difficult definitional and measurement problems involved in studying temporary employment, particularly in an internationally comparative context. Temporary employment may also have beneficial effects. Indeed, the expansion of temporary employment seems to reflect, in part, individuals and employers increased demands for flexibility in working patterns (see also OECD, 1993, 1996 and 1999, on this issue). Some individuals may prefer to be employed in temporary rather than permanent jobs for a number of reasons, e.g. temporary jobs may involve less commitment to the employer and, hence, better opportunities to combine work with other activities (e.g. education and care giving). Other individuals may value temporary jobs as a means of entering the labour market, securing an immediate source of income while gaining work experience that can help them to move up the job ladder. Similarly, by acting as a buffer, temporary jobs may allow employers to adjust their operations more effectively to changes in competitive conditions, including business-cycle fluctuations in demand. Employers may also use temporary jobs as a least-cost way of screening potential candidates for permanent jobs in their firms. Finally, there is some evidence that temporary employment, and, in particular, the intermediary services of temporary agencies, may improve the matching of job seekers to job vacancies, contributing to a reduction in frictional unemployment (Katz and Krueger, 1999). Temporary employment has been an area in which many OECD governments have felt the need to intervene, but the best way forward has not always been evident. Areas of frequent intervention have included: i) setting (or lifting) restrictions governing the use of temporary contracts, as well as the degree of employment protection accorded to permanent workers; ii) establishing equal-treatment standards requiring employers to harmonise pay or fringe benefits between temporary and permanent workers; and iii) providing employers with incentives to hire certain disadvantaged job-seekers on temporary jobs or to move them into permanent jobs. There have been many legislative initiatives in each of these areas, but also considerable confusion surrounding the principles of best practice. One may question what is the best strategy for OECD governments to follow in this area and whether there is an optimal level of regulation of temporary employment that can improve the overall performance of the labour market without exposing a subset of workers to excessive insecurity and precariousness (Cahuc and Postel-Vinay, 2001). To shed more light on this and related issues, this chapter gathers new evidence on the growth in temporary employment, as well as on how temporary jobs compare to permanent jobs

4 130 Taking the measure of temporary employment from the perspective of the welfare of the workers in these jobs. This includes tackling the following questions: Is a steady rise in the share of temporary jobs in total employment a near universal trend across OECD countries or are national experiences more varied? How do workers in temporary jobs differ from those in permanent jobs? How do the wages paid to temporary workers compare with those paid to similar workers in permanent jobs? Are temporary workers penalised in their access to key fringe benefits? Are temporary workers satisfied with their jobs? What is the average duration of temporary contracts and how long do temporary workers stay in their jobs? What are the chances for temporary workers to obtain training, to move up the job ladder or to move into permanent jobs? This is an ambitious set of issues, but falls short of being a comprehensive assessment of temporary employment. Among the important issues not addressed here, in a detailed manner, are the potential efficiency gains from temporary employment and international differences in employment protection legislation (see, however, OECD 1999 for the latter). Main findings The distinction between temporary and permanent jobs is complex and differs significantly between OECD countries. Nonetheless, it is clear that temporary jobs are a significant feature of the employment landscape in most OECD countries. Despite this commonality, international differences in the share of temporary jobs in total employment are large. One of every three jobs is temporary in the Spanish labour market, but fewer than one in twenty in Luxembourg, the Slovak Republic and the United States. Furthermore, these differences are quite persistent, suggesting that there is no universal trend towards a common, high level of temporary employment. There is also considerable diversity across OECD countries in how the share of temporary jobs in total employment evolved between 1985 and A strong rising trend was observed for certain European countries (France, Italy, the Netherlands, Portugal and Spain). However, this is far from a general pattern. Many countries show no clear trend and, in a few cases (Greece and Luxembourg), the temporary share has tended to follow a downward trajectory. Furthermore, the country in which temporary employment grew most strongly during , Spain, saw a decline in the temporary share during Temporary jobs are disproportionately held by younger and less educated workers, as well as those employed in low-skill occupations, agriculture and small firms. In many OECD countries, there is also some tendency for women to be overrepresented among temporary workers, but gender differences are only large in a few countries (Belgium, Finland, Japan) and men are more likely than women to hold temporary jobs in Turkey. Despite these differences in the incidence of temporary employment, temporary workers are a diverse group and they work in a wide

5 Taking the measure of temporary employment 131 range of sectors and occupations, and for both public and private employers of all sizes. The aggregate evidence for European countries indicates that the average wage of temporary workers lags those of permanent workers by between 17% (in Germany) and 47% (in Spain). Using regression techniques to control for differences in individual and job characteristics reduces the wage penalty associated with temporary employment, but it is still statistically and economically significant, ranging up to 27% in the Netherlands. The wage penalty to temporary work is similar for women and men. Another important dimension of temporary jobs is the access they provide to a number of key fringe benefits, such as paid vacations, paid sick leave, unemployment insurance and a pension. Although nominally covered by virtually all public schemes and many voluntary, employer-provided schemes, the de facto eligibility of temporary workers appears to be substantially lower in some cases. This is due to the impact of eligibility criteria, such as minimum contribution periods. In other words, temporary employment per se rarely disqualifies workers from benefits, but the very short duration of many temporary jobs may have that effect. By contrasts, temporary employees with fixed-term employment contracts of a year or longer appear to enjoy the same benefits as permanent employees with the same employer. Temporary workers tend to be less satisfied with their job than permanent workers. The relative dissatisfaction of temporary workers focuses on pay and, especially, job security. Temporary workers are also significantly more likely to report monotonous work tasks and inflexible work schedules, and somewhat more likely to report working night and weekend shifts. Most temporary contracts are issued for durations of less than a year and most temporary workers do not remain on the same temporary job for longer than a year. However, in some OECD countries, a considerable number of temporary workers are hired on longer-duration contracts or cumulate several contract renewals and, hence, accumulate job-tenure of five years or more. Evidence for 11 European countries suggests that more educated temporary workers, as well as those employed in the public sector, tend to be employed on fixed-term contracts of above-average duration, while workers under the age of 25 or who were unemployed previously tend to hold contracts of below-average duration. The evidence for European countries suggests that the majority of temporary workers have considerable continuity in employment: being in employment one year earlier and remaining in employment one and two years later. Depending on the country considered, between one-third and two-thirds of temporary workers move into a permanent job within a two-year time interval, suggesting considerable upward mobility. The other side of the coin is that up to one-fourth of temporary workers are unemployed when interviewed one and two years later, and employers provide significantly less training to temporary than to permanent workers. Temporary workers who are more educated have significantly better chances to receive training and to move into permanent jobs than less educated temporary workers. 1. Trends and main features This section provides an overview of temporary jobs and the workers who hold them. The first issue addressed is to ascertain the number of workers in temporary jobs (i.e. jobs

6 132 Taking the measure of temporary employment that provide little or no prospect of a long-lasting employment relationship) and to test the common perception that the number of workers in just-in-time jobs is climbing steadily. The section also provides an overview of the different contractual forms that temporary employment assumes, as well as their numerical importance in accounting for the total number of temporary jobs. Finally, the demographic and occupational profile of temporary workers is examined, along with several characteristics of their employers. Before they can be counted and analysed, it is necessary to define temporary jobs and develop a strategy for identifying them in the available data sources. (See Annex 3.A for a detailed discussion of these issues.) For the purposes of this chapter, temporary jobs are those forms of dependent employment which, by their nature, do not offer workers the prospect of a long-lasting employment relationship. In many cases, the temporary nature of the job is apparent. For example, this is the case when there is a written employment contract specifying that the job lasts a limited amount of time (e.g. a fixed-term contract for 3 months) or when a worker is hired to perform a specific and time-limited task (e.g. to replace a sick worker or fill a seasonal job). Other cases are less clear-cut, but for each country a list of identifiable job types judged to be temporary has been chosen and then used to classify all jobs as either temporary or permanent. 1 In most cases, the list of job types that is defined as constituting temporary employment has been based on national practice. In some cases, there is no official national definition of temporary employment. In others, the conventionally used definition does not correspond to the concept of a temporary job that is adopted here. In such cases, an attempt has been made to develop a definition of temporary employment that is as consistent as possible with both the conceptual definition mentioned above and the measures used for other countries. Temporary employment raises particular difficulties for making international comparisons, for both economic and statistical reasons. The categories of temporary jobs differ significantly across OECD countries, both in terms of their numerical importance and the legal and customary rules surrounding their use. Accordingly, the economic significance of holding a temporary job could differ significantly between workers in two different countries. The adequacy of national datasets for differentiating temporary from permanent workers also varies. As a result, it should be understood that international comparisons of temporary employment are subject to a significant degree of noncomparability. A. Trends in the level of temporary employment Chart 3.1 provides an overview of the evolution of the share of temporary employment in total dependent employment during Temporary jobs are a significant feature of the employment landscape in all OECD countries, but fears that stable jobs have all but disappeared are not confirmed. Despite the caveats attached to making international comparisons, international differences in the share of temporary jobs are large enough to indicate substantial diversity in the relative importance of temporary jobs. One of every three jobs is temporary in the Spanish labour market, but fewer than one in twenty in Luxembourg, the Slovak Republic and the United States. Furthermore, these differences are quite persistent, suggesting that there is no universal trend towards a common, high level of temporary employment.

7 Taking the measure of temporary employment 133 Chart 3.1. Share of temporary employment in OECD countries, Percentage of dependent employees in temporary jobs a Luxembourg United States Slovak Republic Australia Ireland Iceland Poland United Kingdom Hungary Austria Czech Republic Belgium Norway Italy Denmark Switzerland b OECD Canada Germany Japan Greece Netherlands France Sweden Korea Finland Turkey Portugal Mexico Spain % a) There are breaks in the time series for Greece and Ireland due to changes in the classification of temporary workers between 1995 and The data refer to 1986 instead of 1985 for Portugal; to 1987 instead of 1985 for Spain; to 1996 instead of 1995 for Switzerland; to 1997 instead of 1995 for Australia, Canada, Czech Republic, Hungary and Poland and to 2001 instead of 2000 for Korea and United States. Countries are ranked in ascending order by the share of temporary employment in the most recent year reported and OECD refers to an unweighted average of countries shown. b) The Swiss data only cover persons with a permanent residence permit and hence exclude foreign workers with a seasonal or short duration residence permit. Source: See Table 3.A.1 in Annex 3.A.

8 134 Taking the measure of temporary employment The relative importance of the different contractual types of temporary jobs also appears to be quite heterogeneous, based on data for a smaller number of countries (Table 3.1). In five of these eight countries, fixed-term contracts are by far the most common form of temporary jobs. However, jobs mediated by temporary work agencies (TWAs) came to be more numerous than fixed-term contracts in the Netherlands during the course of the 1990s. 2 The relative importance of fixed-term contracts is even lower in Mexico and the United States, due to the preponderance of seasonal workers in the former and the use of different contractual forms for temporary workers in the latter (Di Natale, 2001). These differences in the mix of contractual types of temporary employment mean that even among countries having similar total shares of temporary jobs, the implications of temporary employment for workers and firms may be quite different. There is also considerable diversity across OECD countries in how the share of temporary jobs in total employment evolved between 1985 and 2000 (Chart 3.1). As is well known, a strong rising trend was observed in certain European countries (France, Italy, the Netherlands, Portugal and, especially, Spain). However, this is far from being a universal pattern and many countries show either no clear trend or, in a few cases (Greece and Luxembourg), the temporary share tended to fall. Furthermore, the country in which temporary employment grew most strongly during , Spain, saw a modest decline in the temporary share during Table 3.2 presents an accounting decomposition of total employment growth during the 1990s into the components attributable to temporary and permanent jobs. This decomposition provides a check on the common perception that few if any new permanent jobs are being created. Once again, the diversity of national experience is highlighted by these results. Temporary jobs account for over two-thirds of total employment growth, or grew Table 3.1. Components of temporary employment Percentage of temporary workers having each type of contract a Temporary help agency workers Fixed-term contracts On-call workers Seasonal workers Other temporary workers Australia Canada France Korea Mexico Netherlands United Kingdom United States Data not available. a) See Table 3.A.2 in Annex 3.A for explanation of the categories of contract type reported for each country. Source: Data from national Labour Force Surveys for France, Mexico and United Kingdom; Pot et al. (2000) for Netherlands; the 2001 Supplement to the Labour Force Survey for Korea; the 1995 Survey of Work Arrangements (SWA) for Canada; the 1997 Survey of Forms of Employment (FOE) for Australia; and the 1995 and 2001 Supplements on Contingent and Alternative Work Arrangements to the Current Population Survey for United States.

9 Taking the measure of temporary employment 135 Table 3.2. Contributions of temporary and permanent jobs to total employment growth, a Cumulative growth of total employment (percentage) Percentage-point contribution of temporary employment Percentage-point contribution of permanent employment Austria ( ) Belgium Canada ( ) Czech Republic ( ) Denmark Finland ( ) France Germany ( ) Greece Hungary ( ) Iceland ( ) Ireland Italy Japan Luxembourg Mexico ( ) Netherlands Norway ( ) Poland ( ) Portugal Slovak Republic ( ) Spain Sweden ( ) Switzerland ( ) Turkey United Kingdom United States ( ) OECD average b a) The contribution of a component of employment is calculated as the change in that component relative to the initial level of total employment. For T, temporary employment and E, total employment: ((Tt Tt-1)/Et-1)*100, gives the percentage-point contribution of temporary employment. b) Unweighted average of countries shown. Source: See Table 3.A.1 in Annex 3.A. despite a fall in total employment, in seven of the twenty-nine countries included in the analysis. However, permanent jobs accounted for two-thirds or more of total employment growth in thirteen of these countries and neither component was dominate in the remaining nine countries. Although it is true that temporary jobs have accounted for most or all job growth in certain countries in certain recent periods (see OECD, 1996 for an analysis of earlier periods) it is not the case that OECD economies have generally failed to generate new permanent jobs. 4 International differences in the share of temporary jobs and its evolution over the past two decades reflect a number of country-specific factors, such as the regulations affecting temporary employment, the sectoral composition of employment, business competitive strategies and the characteristics and preferences of the workforce. There is a growing research literature on the determinants of the incidence of temporary employment, but a unified account that does justice to the diversity of national experiences across the OECD has yet to emerge. Juxtaposing that literature with the data presented here generates several insights: The combination of strict employment protection legislation (EPL) for permanent workers with the liberalisation of regulations for temporary employment appears to account

10 136 Taking the measure of temporary employment Box 3.1. The special case of temporary agency workers Measuring employment mediated by temporary work agencies raises particular difficulties. For example, the turnover of agency workers is very high and it is important to distinguish between stock and flow measures. Another complexity is that the employment contract of agency workers can be with either the agency or the employer in whose establishment they are working at a given time. In the former case, it is even possible that these workers will have an open-ended contract with the agency (i.e. might be considered as a permanent worker using the terminology of this chapter). This is possible in Austria, Finland, Germany, the Netherlands and Sweden (Storrie, 2002). As a result of the special nature of agency work, the most reliable data on temporary agency workers in many OECD countries are collected by the means of special surveys, rather than the general labour force surveys analysed in this chapter for most countries. This text box summarises some of the insights that can be gleaned from these alternative sources of information. Since 1992, the number of agency workers has increased at least five-fold in Denmark, Spain, Italy and Sweden and just under four-fold in Austria (Storrie, 2002). Despite this rapid growth, temporary agency jobs still account for only a small share of all jobs. Looking at the average daily number of people that perform agency work as their main job, it is estimated that between 1.8 and 2.1 million of temporary agency workers were employed in the European Union in 1999, accounting for a little more than 1% of total employment (CIETT, 2000). France has the largest number of temporary agency workers in the EU, but the incidence of agency work is highest in the Netherlands. In Europe, agency workers are generally more likely to be male (with the exception of Scandinavian countries) and younger than are other workers (Storrie, 2002). For a number of EU countries there is also evidence that the proportion of ethnic minorities is higher among agency workers than in other employment forms (the Netherlands, Sweden, Germany). Furthermore, some European countries (Belgium, Germany, and the Netherlands) have targeted special activation policies at temporary work agencies which are subsidised for placing the long-term unemployed or other hard-to-employ groups (e.g. older workers in the Netherlands) into temporary jobs. Preliminary evaluation of these measures in Germany are encouraging (Lechner et al., 2000). There is some limited evidence that temporary agency work varies procyclically, but it is not yet possible to differentiate clearly between business-cycle effects and the recent secular increase in the temporary agency work in most countries. For example, employment growth in the temporary help services accounted for 8.2% of net nonagricultural employment growth in the economic expansion of 1992 to 1998 in the United States, despite only representing approximately 1% of total employment (Katz and Krueger, 1999). In the old länder of Germany, the number of workers employed by temporary work agencies also appears to show procyclicality (Boockmann and Hagen, 2001). In France, temporary agency workers increased their share of total employment from 1.8% in 1996 to 3.8% in 2000, a period of cyclical upswing (Jourdain, 2001). Katz and Krueger (1999) show that the expansion of the temporary help industry in the United States coincided with an inward shift in the Beveridge curve, indicative of improved efficiency in the matching of workers to job vacancies. They argue that labour market intermediaries increase competition and reduce bottlenecks (e.g. allowing employers to find qualified substitute workers quickly), keeping wage pressure low even in a tight labour market, and estimate that the expansion in the temporary agencies reduced the US NAIRU by almost 4% over the period 1989 to 1998.

11 Taking the measure of temporary employment 137 for the rapid growth of the share of temporary jobs that occurred in a few European countries (see Dolado et al., 2001, for Spain and Blanchard and Landier, 2001, and Cadiou et al., 2000, for France). Similarly, employment mediated by temporary work agencies expanded at a very fast rate in Italy, after its legalisation in 1997 (Carmignani et al., 2001; Italian Ministry of Labour, 2001; Nannincini, 2001). At the other end of the policy spectrum, the low shares of temporary employment in Australia, the United Kingdom and the United States suggest that employers make little use of temporary contracts where national legislation provides little job protection for permanent workers. Despite these suggestive national cases, differences in EPL do not appear to explain much of the overall variation in the share of temporary jobs across OECD countries (OECD, 1999). The evolution of temporary employment over time reflects different trends in the different components of temporary employment and a full accounting of the role of regulatory changes on the share of temporary jobs would have to account for these differences. In some countries, the expansion of temporary employment has been driven mainly by the growth of TWA employment (see also Box 3.1). In others, like Sweden, on-call jobs appear to have been the most dynamic component of temporary employment during the nineties (Holmlund and Storrie, 2002). In other OECD countries, factors other than changes in EPL appear to be more important for explaining the share of temporary jobs. For example, there is some evidence that temporary jobs have grown as a response to protracted recession (Morishima, 2001; Pot et al., 2000; Holmlund and Storrie, 2002), which might have increased employers demand for flexible labour. By contrast, a high share of agricultural workers appears to be the most important factor explaining the high (but, often falling) shares of temporary jobs in certain other OECD countries (Greece, Mexico and Turkey). 5 Finally, the example of France suggests that the introduction of large-scale public employment programmes for labour force groups experiencing difficulties (see Table 3.A.4 and Chapter 1) has sometimes made an important contribution to the growth in temporary employment. In sum, a considerable number of factors are important for determining the share of temporary jobs and no attempt is made here to provide an exhaustive list or quantify their relative importance. B. Characteristics of temporary workers and temporary jobs Additional insights into the nature and implications of temporary employment may be gained by inspecting the composition of temporary employment in terms of the gender, age, education level and occupation of temporary workers, and the industry and size of the employing establishment. This information is particularly useful for assessing whether temporary employment is likely to play an important role in confining vulnerable workforce groups in a lower tier of precarious jobs. The strongest demographic patterns in the incidence of temporary employment are the strong over-representation of younger and less educated workers (Table 3.3). On average for the countries considered, youths (i.e. workers aged years) are approximately 3 times as likely as older workers to hold a temporary job, suggesting that these jobs often serve as entry ports into the world of work. Indeed, one-half of young workers hold

12 Table 3.3. Incidence of temporary employment by individual and job characteristics, 2000 Share of temporary employment in total dependent employment for the indicated group (percentage) Gender Age groups Educational attainment a Industry Occupation b Size of establishment Female Male Low Medium High Agriculture Industry Services White collar Pink collar Blue collar Unskilled occupations Australia c Austria Belgium Canada c Czech Republic Denmark Finland France Germany Greece Hungary Iceland Ireland Italy Japan Luxembourg Mexico d Netherlands Norway Poland Portugal Slovak Republic Spain Sweden Switzerland e Turkey United Kingdom United States f OECD average g Data not available. a) Highest level of education or training successfully completed. Low refers to ISCED 0/1/2, medium refers to ISCED 3 and high refers to ISCED 5/6/7. b) Four broad occupational groupings were defined in terms of the 1-digit occupations of ISCO-88: white-collar occupations correspond to occupations 1-3 (i.e. legislators, senior officials and managers; professionals; technicians and associate professionals); pink-collar occupations correspond to occupations 4 and 5 (i.e. clerks; and service workers and shop and market sales workers); blue-collar occupations correspond to occupations 6-8 (i.e. skilled agricultural and fishery workers; craft and related trades workers; and plant and machine operators and assemblers); and unskilled occupations correspond to occupation 9 (i.e. elementary occupations). c) The data relate to The size of establishment classification is: less than 20 persons, persons and 100 and more persons. d) The size of establishment classification is: less than 15 persons, 16 to 100 persons, more than 100 persons. e) The Swiss LFS data only cover persons with a permanent residence permit and hence exclude foreign workers with a seasonal or short duration residence permit. f) The data relate to g) Unweighted average of countries shown. Source: Secretariat calculations based on data from the sources documented in Table 3.A.1 in Annex 3.A. Less than 20 persons persons 50 and more persons 138 Taking the measure of temporary employment

13 Table 3.4. Distribution of temporary employment by individual and job characteristics, 2000 Share of temporary workers in each group (percentage) Gender Age groups Educational attainment a Industry Occupations b Size of establishment Female Low Medium High Agriculture Industry Services White collar Pink collar Blue collar Unskilled occupations Australia c Austria Belgium Canada c Czech Republic Denmark Finland France Germany Greece Hungary Iceland Ireland Italy Japan Luxembourg Mexico d Netherlands Norway Poland Portugal Slovak Republic Spain Sweden Switzerland e Turkey United Kingdom United States f OECD average g Data not available. a) Highest level of education or training successfully completed. Low refers to ISCED 0/1/2, medium refers to ISCED 3 and high refers to ISCED 5/6/7. b) Four broad occupational groupings were defined in terms of the 1-digit occupations of ISCO-88: white-collar occupations correspond to occupations 1-3 (i.e. legislators, senior officials and managers; professionals; technicians and associate professionals); pink-collar occupations correspond to occupations 4 and 5 (i.e. clerks; and service workers and shop and market sales workers); blue-collar occupations correspond to occupations 6-8 (i.e. skilled agricultural and fishery workers; craft and related trades workers; and plant and machine operators and assemblers); and unskilled occupations correspond to occupation 9 (i.e. elementary occupations). c) The data relate to The size of establishment classification is: less than 20 persons, persons and 100 and more persons. d) The size of establishment classification is: less than 15 persons, 16 to 100 persons, more than 100 persons. e) The Swiss LFS data only cover persons with a permanent residence permit and hence exclude foreign workers with a seasonal or short duration residence permit. f) The data relate to g) Unweighted average of countries shown. Source: Secretariat calculations based on data from the sources documented in Table 3.A.1 in Annex 3.A. Less than 20 persons 20 to 50 persons 50 and more persons Taking the measure of temporary employment 139

14 140 Taking the measure of temporary employment temporary jobs in two European countries (Finland and Spain). More suggestive of longterm traps in precarious work, workers who have not completed upper secondary schooling have a rate of temporary employment that is approximately 60% higher than that of more educated workers. However, there are some exceptions to these general patterns. For example, older workers have a higher incidence of temporary work than younger workers in the Czech and Slovak Republics and Turkey, while temporary work is most common for the most educated members of the workforce in the United Kingdom. In many OECD countries, women are over-represented among temporary workers, but gender differences are only large in a few countries (Belgium, Finland, Japan and the Netherlands) and men are considerably more likely than women to hold temporary jobs in Turkey. The industrial and occupational profiles of temporary jobs help to explain why men are nearly as likely to hold temporary jobs as women. The highest concentrations of temporary jobs are to be found in agriculture and the unskilled (or elementary ) occupations. These are predominantly manual jobs that are conventionally held by men. However, less skilled, service jobs (i.e. pink-collar jobs such as retail sales clerks and secretaries) are more likely to be temporary than are the skilled, white-collar jobs and jobs in industry. Finally, it appears that smaller firms are more likely to hire workers on temporary jobs than are medium- and large-sized firms. Despite these differences in the incidence of temporary employment, temporary workers are a diverse group and are employed in significant numbers in all major sectors and occupations, and by employers of all sizes (Table 3.4). Averaging over 28 OECD countries, the majority of temporary workers are to be found in the same demographic and institutional categories as the majority of all workers (i.e. men, ages 25-54, at least an upper secondary education, semi-skilled or skilled occupations, and service industries). It follows that the majority of temporary workers do not appear to fit the profile of at-risk Chart 3.2. Incidence of part-time work for temporary and permanent workers, 2000 Percentage of workers employed for less than 30 hours per week Permanent workers Temporary workers % % Mexico United States (2001) Hungary Slovak Republic Portugal Austria Spain Germany Greece Switzerland Finland Czech Republic Luxembourg OECD a France Denmark Australia Poland Italy Canada Belgium Iceland Norway Sweden United Kingdom Ireland Netherlands 0 a) OECD refers to an unweighted average of the countries shown. Source: See Table 3.A.1 in Annex 3.A.

15 Taking the measure of temporary employment 141 workers, likely to be marginalised in the labour market, despite the over-representation of youths and less educated workers in temporary jobs. It also follows that many temporary workers provide a large share of their family s income and are unlikely to voluntarily accept lower earnings and fringe benefits in exchange for the opportunity to work intermittently or try out a series of jobs. In most OECD countries, temporary workers are more likely to work a part-time schedule than are permanent workers (see Chart 3.2), sometimes very much more likely (e.g. in the Czech Republic, Ireland, Italy and Poland). In Ireland and the Netherlands, more than one in two temporary workers are part-time workers. However, these two types of non-standard work are far from being synonymous. In several countries, permanent workers are actually more likely to be employed part time than are temporary workers, who tend to be either apprentices (Austria, Germany and Switzerland) or agricultural workers (Mexico). These international differences in the overlap between temporary and part-time jobs emphasise the diversity of temporary jobs and consequent complexity of any assessment of their implications for the welfare of the workers in these jobs. The following section examines these issues in greater depth. 2. Pay, access to fringe benefits and job satisfaction of temporary workers A. Pay levels of temporary workers Theoretical considerations suggest that pay in temporary jobs may be either better or worse than in permanent jobs. Wage formation theories based on the hypothesis of compensating differentials the pay attached to a job must compensate for any less advantageous characteristics would suggest that temporary workers be paid more than workers in permanent jobs, assuming that most workers would prefer a permanent job. On the other hand, theories of dual labour markets predict that workers in the secondary segment of the labour market including those on temporary jobs are paid less (and have less access to fringe benefits) than workers in the primary segment of the labour market. From an efficiency-wage perspective, Guell (2000) argues that in the case of fixed-term contracts, the possibility of renewing the contract matters more than the wage paid in order to provide workers with ( non-shirking ) work incentives. She shows that the higher are the chances of having one s contract renewed, the lower will be the wage paid for temporary work. Certain policies and labour market institutions found in most OECD countries may have the effect of equalising the wages of temporary and permanent workers who perform equivalent work (see Table 3.5), although direct evidence for such an effect appears to be lacking. Minimum wage legislation, when present, typically covers workers in temporary jobs as well as those in permanent jobs. However, special sub-minimum wages are sometimes established for certain classes of workers likely to be found in temporary jobs (e.g. apprentices or youths). Similarly, legislation on equality of opportunity between different groups in the labour market typically applies to temporary workers, at least implicitly. However, collective agreements on pay do not always extend automatically to temporary workers and only a few OECD countries (e.g. Belgium, France and Spain) have enacted legislation that explicitly requires temporary workers to be paid the same wages as equivalent permanent workers.

16 142 Taking the measure of temporary employment Table 3.5. Wage determination principles applying to temporary employment Minimum wage Collective agreements applying automatically Equal opportunity Equal pay to regular Australia yes no yes yes Austria yes no yes yes Belgium yes, for > 1 month employment yes yes yes Czech Republic yes yes yes no Denmark not applicable yes yes no Finland not applicable yes yes no France yes yes yes yes Korea yes yes, to union members not explicitly no Japan yes yes, to union members not explicitly no Italy not applicable yes, usually special provisions yes no Mexico yes yes not explicitly no Netherlands yes yes yes yes Norway not applicable yes yes no Poland yes yes yes yes Portugal yes no yes no Spain yes yes yes yes Sweden not applicable yes yes yes Switzerland not applicable no yes no Turkey yes no not applicable no United Kingdom yes no yes no United States yes no yes no Source: Secretariat elaboration of data collected directly from OECD Member governments. The inconclusiveness of theoretical and institutional arguments means that the impact of temporary employment on pay is essentially an empirical question. A number of studies provide estimates of wage differentials between temporary and permanent workers, for one or a few countries. Among these, Booth et al. (2000) found evidence for Britain of a significant wage penalty of the order of 16% for men on temporary contracts and 13% for women on temporary contracts. They also concluded that the fact of having held a temporary job, at an earlier stage of their working life, carried a significant wage penalty for men, but not for women. Dekker (2002) finds evidence of significant wage penalties for temporary workers in the Netherlands, Germany and the United Kingdom, on the basis of wage regressions estimated using national longitudinal data. Blanchard and Landier (2001) conclude that individuals on fixed-term contracts earned on average about 20% less than permanent workers in France. 6 Houseman (1997), using data from a survey of US employers, found that workers on temporary jobs defined as including fixed-term contracts, on-call work, contracting out and seasonal workers were paid significantly less than permanent workers. Table 3.6 compares the gross hourly wage distributions of temporary and permanent workers in 13 EU countries. 7 It shows that temporary workers are paid less than permanent workers, with the average wage gap varying between a high of 47% in Spain and a low of 17% in Germany. The wages of temporary workers are below those of permanent workers at the 25th, 50th and 75th percentiles of the wage distribution. However, a considerable number of temporary workers have above-average wages. In nine of the thirteen countries analysed, the wage of the 75th percentile of temporary workers is essentially the same or higher than the median wage for permanent workers. Temporary jobs are not synonymous with low-paid jobs, at least in European countries. The evidence presented in Table 3.6 does not account for differences in individual or job characteristics, such as age or sector of employment, that may lower the wages of tem-

17 Taking the measure of temporary employment 143 Table 3.6. Relative wages of temporary workers, 1997 Distribution of hourly gross wages (in ECU) for full-time workers by temporary/permanent status a Work arrangement 25th percentile Median 75th percentile Mean Wage gap b Austria Permanent n.a. Temporary Belgium Permanent n.a. Temporary Denmark Permanent n.a. Temporary Finland Permanent n.a. Temporary France Permanent n.a. Temporary Germany c Permanent n.a. Temporary Greece Permanent n.a. Temporary Ireland Permanent n.a. Temporary Italy Permanent n.a. Temporary Portugal Permanent n.a. Temporary Spain Permanent n.a. Temporary Netherlands Permanent n.a. Temporary United Kingdom c Permanent n.a. Temporary n.a.: Not applicable. a) The wage data refer to dependent employees working more than 30 hours per week. b) The wage gap is computed as the ratio of the mean wage of temporary workers to the mean wage of permanent workers. c) The data refer to national panel surveys included in the ECHP: the Socio-Economic Panel for Germany and the British Household Panel Survey for United Kingdom. Source: Secretariat calculations based on microdata from the European Community Household Panel, wave 4. porary workers relative to those of permanent workers, without indicating any causal impact of temporary work contracts on the wage received by a particular worker. Table 3.3 shows that, for example, youths are more likely to be employed in temporary jobs than older workers and that temporary jobs are more likely to occur in agriculture and to be offered by small-size firms. All these characteristics would be expected to lower the wage of an average temporary worker compared with those of an average permanent worker. Multivariate regression techniques can be used to provide a more accurate estimate of the independent impact of holding a temporary job on pay, by standardising for pay differences due to other individual and job characteristics. Table 3.7 presents such estimates, which are based on wage regressions that were estimated separately for men and women. 8 On the basis of the results shown in Table 3.7 the following conclusions can be drawn: Standardising for worker and job characteristics reduces the wage penalty associated with holding a temporary job, but does not eliminate it. There are statistically significant wage penalties for temporary workers in all of the countries considered (except that the estimated penalty is not significant for Belgian women), with the estimated wage penalty being as high as 27% for Dutch men. 9

18 144 Taking the measure of temporary employment Table 3.7. Multivariate estimates of the wage penalty for temporary work, 1997 OLS coefficients from log-wage regression for full-time workers a Men Women Number of observations Coefficient Number of observations Coefficient Austria (1 587) 0.06* (854) 0.12** Belgium (1 155) 0.12** (7 2) 0.02 Denmark b (1 427) 0.06** (1 097) 0.05** Finland (1 550) 0.16** (1 525) 0.12** France (959) 0.14** (861) 0.20** Germany c (2 994) 0.10** (1 724) 0.18** Greece (131) 0.12** (743) 0.20** Ireland (1 334) 0.12** (748) 0.20** Italy (2 501) 0.13** (1 372) 0.15** Netherlands (2 270) 0.24** (862) 0.22** Portugal (2 322) 0.07** (1 558) 0.14** Spain (2 582) 0.16** (1 212) 0.19** United Kingdom (2 088) 0.13** (1 481) 0.13** ECHP countries d (19 739) 0.15** (11 918) 0.16** ECHP: European Community Household Panel. * and ** denote statistical significance at the 10% and 5% levels, respectively. a) OLS coefficients for a dummy variable for temporary employment. The dependent variable is the logarithm of the gross hourly wage and the regression is estimated for full-time workers (> 30 hours per week). In addition to the dummy for temporary work, controls are included for age, education, firm-size, public or private sector, one-digit occupation, job tenure. b) Data refer to Therefore, Denmark is not included in the pooled ECHP-countries model. c) There is no information on firm-size for Germany which is, therefore, excluded from the pooled ECHP-countries regression. d) Pooled regression for all countries shown above, except Denmark and Germany. Source: Secretariat estimates using data from the European Community Household Panel, waves 3 and 4. When the estimated wage penalties for temporary work differ by gender, they tend to be larger for women than for men. However, the wage penalty for men is substantially larger than that for women in Belgium and somewhat larger in Finland and the Netherlands. Re-estimating the model including part-time workers (results not shown) does not affect the findings of significant wage penalties nor does it impact much on their estimated size. These findings suggest that temporary jobs pay less than permanent ones, even after controlling for a range of individual and industrial characteristics. However, the regressions do not control for all potentially important characteristics, nor for the potential endogeneity of temporary work. Furthermore, it should be borne in mind that national differences in the estimated wage penalties may reflect, not only different economic and institutional contexts, but also differences in data quality. Accordingly, these regressions may still provide biased estimate of the wage penalty to temporary jobs. B. Fringe benefits of temporary workers Another important dimension of temporary jobs is the access they may grant to a number of key, fringe benefits such as paid vacations, paid sick leave, unemployment insurance, maternity leave and a retirement pension. In analysing this issue, it is important to distinguish between countries where most benefits are provided on a universal basis by legislation, as is the case for many European countries, and countries where many benefits are provided by employers on a voluntary basis, as in the United States.

19 Taking the measure of temporary employment 145 National regulations in the area of workers (or citizens ) access to benefits tend to be complex and it is often difficult to judge whether temporary workers fall in or out of the net. 10 In some cases, workers on particular employment relationships, such as agency and on-call work, or traineeships, internships and probationary contracts which are sometimes included among temporary jobs (see Annex 3.A) are excluded from statutory fringe benefits. Even when temporary workers are subject to the same rules as permanent workers, their de facto entitlement to benefits may be more limited. In particular, temporary workers may fail to gain access to some or all benefits when entitlement conditions are formulated in terms of earnings thresholds and minimum duration of employment or minimum contribution periods. The risk of failing to access key fringe benefits is probably greater for temporary workers when fringe benefits are provided by employers on a voluntary basis, rather than under statutory requirements. Some evidence on legal conditions for entitlement to fringe benefits that may affect temporary workers access to such benefits is presented in Table The following facts emerge: Paid holidays are a statutory right for workers in all OECD countries except for Turkey and the United States, but entitlement is usually conditional on having been employed for some minimum period of time with the same employer (which varies between 13 days in Finland and one year in Mexico) and sometimes also on a working hours threshold (Finland, Korea and Japan). In many countries, paid vacations for workers on short-term contract may actually be granted in the form of extra pay rather than as actual days off work. Paid sick leave is a statutory right in the majority of OECD countries (but not in Australia, the Czech Republic, Korea, Japan, Switzerland and the United States), 12 but in most countries entitlement is conditional on some minimum contribution period (varying between 3 days in Denmark and 6 months in Portugal) or on having earnings above a minimum threshold (the United Kingdom). In Austria, most temporary workers are entitled to paid sick leave, but this is not the case for on-call workers (who are, however, entitled to postpone work when sick). Entitlement to unemployment insurance is a statutory right in most OECD countries, except for Australia and Mexico, but the ability to draw benefits is usually subject to rather long contribution periods (varying between 4 months in France and one year in most other countries) and sometimes also to a minimum earnings threshold (Austria, Norway, Poland, the United Kingdom and the United States) or an hours threshold (Finland and Korea). Entitlement to paid maternity leave is a statutory right in most OECD countries (except for Australia, the Czech Republic, Japan, Switzerland and the United States) which is, however, subject to a minimum contribution period in most OECD countries, varying between 3 days in Denmark and 30 weeks in Mexico. Participation in a public pension scheme is statutory right in all OECD countries. However, participation in the scheme is sometimes conditional on a minimum employment period (Finland, Korea, Mexico, Poland, Portugal) or earnings threshold (Finland, Switzerland and the United Kingdom) or hours threshold (Korea). However, in the case of private (or of a mix of private and public) pension plans, transferability of rights upon changing jobs may be a problem.

20 Table 3.8. General conditions for entitlement to fringe benefits Statutory right Paid holidays Sick leave Unemployment insurance a Pension Paid maternity/parental leave b Employment duration Statutory right Australia yes often 12 months no Austria yes 6 months yes (not for on-call workers) Contribution period Statutory right Contribution period Other conditions Statutory right earnings threshold for those with < 1 / 5 full-time hours yes, income support yes Employment duration all yes no 52 weeks in past 24 months Belgium yes all yes 3 months yes 312 days in past 6 months for < 36 years old and more days for older age groups Czech Republic yes various conditions Denmark yes all yes > 72 hours in past 8 weeks Finland yes >14 days or >35hrs per month France yes 1 month yes 800 hours in past 12 months no not applicable yes 12 months in past 3 years voluntary participation 52 weeks in past 3 years; 34 weeks for part-timers yes all yes 43 weeks in past 24 months and >18 hours per week yes 4 months in past 18 months Germany yes all pro rata yes all yes 12 months in last 3 years or 6months if a seasonal worker earnings threshold for those with < 1 / 5 full-time hours yes earnings threshold for those with < 1 / 5 full-time hours Statutory right Contribution period Beyond contract yes earnings threshold for those with < 1 / 5 full-time hours yes all yes all yes (at benefit level) yes yes not applicable no not applicable yes yes all yes > 72 hours in past 8 weeks yes a month and minimum earnings yes yes all yes (by the state) yes all yes 200 hours per quarter in past 6 months or 800 hours in past year as for all employees none, accumulates per month worked yes yes all yes 146 Taking the measure of temporary employment